Question

In: Economics

Suppose you work for Kellogg's breakfast cereal division. Your job to estimate demand for Kellogg's breakfast...

Suppose you work for Kellogg's breakfast cereal division. Your job to estimate demand for Kellogg's breakfast cereals. Explain how you can use the different elasticities to the impact the price of the cereal, prices of subsitutes and complements, and consumer income will have on the demand for Kellogg's cereals. Don't forget to include your assumptions.

Solutions

Expert Solution

a) Elastic is the case where the percentage change in demand is more than the percentage change in price whereas inelastic is the case where the percentage change in quantity is less than percentage change in the price which means demand does not change much with the change in the price.

Suppose the demand for Kellog's breakfast cereal is elastic then in this case,raising the price will cause the demand for cereal to fall which will lead to fall in total revenue.

On the other and if the demand for the breakfast is inelastic,then an increase in price will cause the demand to not change that much and in this case total revenue will increase.

b) When the price of the substitutes increases then the demand for kellog's cereal will increase as it would be cheaper to buy in comparison to its substitute.

Ont the other hand when the price of the substitutes falls then the demand for Kellog's cereal will decrease as it will be more costly in comparison to its substitute.

c) Assuming Kellog's cereal to be a normal good,when the income of the consumer rises,their demand for the cereal will increase and if their income decreases then the demand for cereal will fall.

On the other hand,assuming cereal to be an inferior good,when the income of the consumer increases,their demand for cereal will fall and when their income decreases their demand for the cereal will increase.

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

You work for a breakfast cereal manufacturer. Your job is to decide if the new machinery...
You work for a breakfast cereal manufacturer. Your job is to decide if the new machinery is overfilling the cereal boxes. You take a sample of 37 randomly selected boxes and find that the mean weight for the sample is 1.6 lbs with sample standard deviation 0.3 lbs. The boxes are supposed to weigh 1.5 lbs. Conduct a hypothesis test at the α = 0.01 significance level. Be sure to state your conclusion in context.
Weekly demand at a grocery store for a brand of breakfast cereal is normally distributed with...
Weekly demand at a grocery store for a brand of breakfast cereal is normally distributed with a mean of 850 boxes and a standard deviation of 80 boxes b) What is the probability that weekly demand is: Less than 900 boxes? More than 1020 boxes? Less than 660 boxes or greater than 980 boxes?
Suppose today is May 1, 2019, and your firm produces breakfast cereal and needs 400,000 bushels...
Suppose today is May 1, 2019, and your firm produces breakfast cereal and needs 400,000 bushels of corn in July 2019 for an upcoming promotion. You would like to lock in your costs today because you are concerned that corn prices might rise between now and July. Each contract is for 5,000 bushels; the settle price for July 2019 is $5.18 per bushel. Suppose corn prices are $5.14 per bushel in July 2019. What will your cumulative mark to market...
You are the marketing director for a children’s breakfast cereal and you have traditionally advertised heavily...
You are the marketing director for a children’s breakfast cereal and you have traditionally advertised heavily on late-afternoon animated TV shows (after-school cartoons.) This strategy was based on a study from the 1970s showing that children in your target demographic watch an average of 76 minutes of late-afternoon animated TV shows each day. You suspect, however, that since the study was done so long ago that it may not reflect the TV viewing habits of today’s youth this may no...
As winner of a breakfast cereal competition, you can choose one of the following prizes: a....
As winner of a breakfast cereal competition, you can choose one of the following prizes: a. $180,000 at the end of five years. b. $11,400 a year forever. c. $19,000 for each of 10 years. d. $6,500 next year and increasing thereafter by 5% a year forever. Assume that the discount rate is 12%. i. (20 pts) Write down the discounted cash flow equation for each option.
As a winner of a breakfast cereal competition, you can choose one of the following prizes:...
As a winner of a breakfast cereal competition, you can choose one of the following prizes: a) 11,000 a year (forever) and starting NEXT year b) 12,000 a year (forever) and starting THIS year c) 3,000 next year and increasing thereafter by 2% a year forever d) 7,000 starting this year, geowing at 1% per annum e) 800,000 at the end of 20 years f) 6,000 a year for 5 years starting next year g) 1,000 a year starting this...
As a winner of a breakfast cereal competition, you can choose one of the following prizes:...
As a winner of a breakfast cereal competition, you can choose one of the following prizes: $100,000 now. $100,000 at the end of 5 years. $10,000 a year forever (starting from this year). $11,000 a year forever (starting from next year). $2,000 next year and increasing thereafter by 2% a year forever $6,000 starting this year, growing at 1% per annum $800,000 at the end of 20 years $5,000 a year for 5 years starting next year $1,000 a year,...
Suppose the price elasticity of demand 1.15 If​ so, then the demand for cereal is ​elastic...
Suppose the price elasticity of demand 1.15 If​ so, then the demand for cereal is ​elastic or inelastic. In another​ example, assume the price elasticity of demand for a particular magazine is negative .1.16 The demand for the magazine is inelastic. or . • Elastic
Suppose you want to estimate the true proportion of persons who regularly eat oatmeal for breakfast....
Suppose you want to estimate the true proportion of persons who regularly eat oatmeal for breakfast. You get a random sample of n=100 responses. From the sample, you find that 23 people regularly eat oatmeal. A) Construct a 99% confidence interval for the population proportion. B) Interpret the meaning of a confidence interval
Do you regularly consume fortified or enriched foods, such as breakfast cereal? Do you believe these foods benefit your health?
Do you regularly consume fortified or enriched foods, such as breakfast cereal? Do you believe these foods benefit your health?  Do you drink beverages that have added vitamins or minerals, such as vitamin waters or energy drinks? If you do, why, and how have they affected your health?  In your opinion, do the benefits of supplements and/or fortified foods and beverages justify their cost? Why or why not
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT